May 18 (Bloomberg) -- The U.S. yesterday imposed tariffs of
as much as 250 percent on Chinese-made solar cells to aid
domestic manufacturers beset by foreign competition, though
critics said the decision may end up raising prices and hurting
the U.S. renewable energy industry.

The U.S. Commerce Department ruled that Chinese
manufacturers sold cells in the U.S. at prices below the cost of
production and announced preliminary antidumping duties ranging
from 31 percent to 250 percent, depending on the manufacturer.
China criticized the action, saying the U.S. is hurting itself
and cooperation between the world’s two largest economies.

The decision is meant to provide a boost to the U.S. solar
manufacturing industry, where four companies filed for
bankruptcy in the past year. The tariffs will probably inflame
trade tensions and drive up prices for solar projects in the
U.S., according to Shyam Mehta, an analyst with GTM Research in
Boston. The duties may prompt Chinese companies to shift
production to other countries to evade the duties.

“China-based manufacturers would certainly have to raise
U.S. prices to turn a profit,” Mehta said in a statement.
“This is likely to lead to module price increases in the U.S.,
which would serve to dampen demand and installation growth.”

The Commerce Department sided with companies including the
U.S. unit of SolarWorld AG, which had argued that Chinese
companies benefit from government subsidies, allowing them to
sell solar products below cost.

Illegal Subsidies

“Commerce today put importers and purchasers on notice
about the consequences of importing illegally subsidized and
dumped products from China,” Gordon Brinser, president of
SolarWorld’s U.S. unit, said in a statement.

Imposing tariffs “gives rise to the possibility that
domestic solar manufacturing, environmentally sustainable solar
production and robust global competition might one day soon
return, boosting U.S. manufacturing jobs,” he said.

SolarWorld said its Hillsboro, Oregon-based U.S. unit can’t
compete with Chinese exporters, including Suntech Power Holdings
Co., the world’s largest solar-panel maker, and Trina Solar Ltd.
unless tariffs are imposed.

Suntech was told to pay 31.22 percent, Trina’s levies were
set at 31.14 percent and 59 other Chinese companies were told to
pay duties of 31.18 percent. All other Chinese producers
received a rate of 249.96 percent.

‘Highly Concerned’

China is “highly concerned” by the U.S. action, which has
damaged U.S.-China cooperation in the field of clean and new
energy, Hong Lei, a Foreign Ministry spokesman, told reporters
today in Beijing. Chinese companies have a price advantage
because they have reduced costs through technological research,
Hong said.

Shen Danyang, a spokesman for China’s Commerce Ministry,
said the nation is “strongly dissatisfied” with the “unfair”
U.S. judgment, which shows America’s inclination toward
protectionism. China is urging the U.S. Commerce Department to
correct the action, said Shen, who didn’t mention any
countermeasures his ministry may take.

SolarWorld’s Brinser is also president of the Coalition for
Solar Manufacturing, which is made up of seven U.S. solar
manufacturers and spearheaded the trade suit.

His counterpart, Jigar Shah, president of the Coalition for
Affordable Solar Energy, said duties won’t benefit the rest of
the U.S. solar industry, including developers that buy solar
panels and companies that sell the gear used to produce them.

Increasing Prices

The tariffs “will increase solar electricity prices in the
U.S. precisely at the moment solar power is becoming competitive
with fossil fuel generated electricity,” Shah said in a
statement. “This new artificial tax will undermine the success
of the U.S. solar industry.”

Protecting U.S. panel makers may not be the best way to
promote renewable energy in the U.S., according to Tom Gutierrez,
chief executive officer of GT Advanced Technologies Inc., a
Merrimack, New Hampshire-based supplier of solar manufacturing
gear.

“The war we are fighting is a technology way,” Gutierrez
said in an interview. “If we get stuck protecting low level
assembly jobs, we lose on the future.”

The prices of solar modules, or panels, fell 50 percent
last year and continue falling, largely as a result of the cheap
Chinese imports, Timothy Brightbill, an attorney for SolarWorld,
said in an interview.

Trade Tensions

“A 50 percent price collapse has no relation to product
improvement,” Brightbill said before the decision was announced.
“It was all because of China’s massive overbuilt capacity and
the flooding of the market with Chinese imports.”

The U.S. decision to impose import duties on Chinese solar
panels will raise their price to $1.11 per watt, according to
calculations by Bloomberg New Energy Finance, a London-based
researcher owned by Bloomberg LP. That price is 17 percent
higher than the current spot price of non-Chinese panels.

Charles Yonts, an alternative-energy analyst at CLSA Ltd.
in Hong Kong, said China is likely to retaliate by targeting U.S.
makers of polysilicon, the raw material that goes into solar
cells. MEMC Electronic Materials Inc. is the largest publicly
traded U.S. maker of polysilicon, according to data compiled by
Bloomberg.

The lift for U.S. manufacturers “should be short-lived,”
Yonts said. “They’ll still get smoked by the Chinese.”

Chinese panel-makers including Suntech and Trina earn about
10 percent to 15 percent on average from sales to the U.S.,
Yonts said. They can create a “workaround” of contracting
manufacturing to Taiwan to avoid U.S. tariffs, he said.

Maintaining Market Shares

“With a workaround, they’re still the cheapest option out
there and will maintain their market shares more or less,”
Yonts said.

The U.S. has also been jousting with China over market
access for products including steel pipes, poultry, tires and
music. Along with the European Union and Japan, the U.S. filed a
complaint in March with the World Trade Organization challenging
the Asian nation’s export limits on rare-earth minerals.

President Barack Obama “is trying to create a market for
solar in the U.S., so it’s curious why he wants to impose
tariffs, which will make it more expensive,” said Dan Ikenson,
director of the Washington-based Cato Institute’s Herbert A.
Stiefel Center for Trade Policy Studies. “It will imperil jobs
in the much more economically significant downstream.”

The antidumping tariffs add to duties as high as 4.73
percent imposed earlier for getting unfair subsidies from
China’s government.

Potential ‘Trade War’

“We have thrown down the gauntlet and opened up the door
for a potential global trade war in the global solar sector,”
said Kelly Dougherty, an analyst with New York-based Macquarie
Capital USA Inc. “That’s not what we need right now.”

The Commerce Department said a final determination on the
tariffs would be made in early October. U.S. customs agents will
collect a deposit or bond on solar cells made in China in the 90
days before today’s decision.

“These duties do not reflect the reality of a highly
competitive global solar industry,” Andrew Beebe, Suntech’s
chief commercial officer, said in an e-mailed statement.

Obama has been criticized for his support of solar-equipment manufacturers, including Solyndra LLC, with some
Republicans in Congress doubting the industry can be profitable.
The lawmakers are pushing Obama to take a tougher stance with
China, citing a $295 billion trade deficit.

Solyndra is among U.S. solar companies that have failed
since August, including SpectraWatt Inc., Evergreen Solar Inc.
and Energy Conversion Devices Inc.

Moving Production

Some Chinese solar companies may move production to other
countries and avoid the duties. “It’s something we’ve been
thinking about over the last year already,” said Isabelle
Christensen, director of North American operations for
JinkoSolar Holding Co., a Chinese solar module maker.

“We already have plans in place if the tariff is high,”
Christensen said in an interview before the duties were
announced. “In the long run, we’ll have switched to alternative
manufacturing locations.”

The Commerce Department’s decision, while not final, will
help to prevent market participants from skirting already
established international rules, Senator Ron Wyden, an Oregon
Democrat, said in a phone interview.

“My gut tells me that there’s going to be a temptation now
to portray this as a win for U.S. solar manufacturers” and a
loss for Chinese exporters, said Wyden, who leads the Senate
Finance Committee’s trade panel. “This is going to be a win for
a rules-based trading system.”